World shares soared on Friday, June 22, but were set to end a second week lower amid intensifying worries over the fallout of a trade dispute resulting from U.S. tariffs, while oil prices were higher ahead of an OPEC meeting later in the day.
The MSCI All-Country World index .MIWD00000PUS, which tracks stocks in 47 countries, was up 0.2 percent in the European morning but down 1.3 percent on the week, its worst weekly showing since mid-March.
Investor anxiety over a possible full-blown trade war has deepened this week over increasingly sharp rhetoric between the United States and China, and growing evidence of the economic damage such a conflict could produce.
German carmaker Daimler (DAIGn.DE) cut its earnings forecast earlier this week, saying tariffs on cars exported from the United States to China would hurt Mercedes-Benz sales.
India joined the European Union and China in retaliating against U.S. President Trump’s tariffs on steel and aluminium, raising import duties on U.S. almonds by 20 percent.
U.S. Commerce Secretary Wilbur Ross said on Thursday the United States needed to make it harder for its trading partners to have high trade barriers in order to achieve Trump’s ultimate goal of lower tariffs and a level playing field.
Chinese state media said on Friday that U.S. protectionism was self-defeating and a “symptom of paranoid delusions” that must not distract China from its path to modernisation.
“With no negotiations in sight at the moment, our base case (scenario) is shifting to a further escalation of the trade conflict between the two countries,” wrote analysts at Danske Bank in a note to clients.
There is a risk of a further deterioration in relations on June 30, when Washington is due to announce a plan to restrict Chinese investments into the United States and limit exports of U.S. tech products to China, they added.
Strong financial stocks and better-than-expected euro zone purchasing managers index for services helped drive a timid relief bounce in European shares. The pan-European STOXX 600 and its euro zone counterpart .STOXXE were set for their biggest weekly loss in three months as the consequences of rising protectionism sank in, notably for the autos sector.
The strong PMIs also boosted the euro EUR=D4. It was last up half a percent on the day and was set to end the week higher by half a percent. Against a basket of currencies, the dollar was 0.2 percent lower.
Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped as much as 0.35 percent at one point to touch its weakest since early December, before erasing losses to be up 0.15 percent. Still it was 2.3 percent off for the week.
Hong Kong’s Hang Seng .HSI plumbed six-month lows, having lost 3.9 percent so far this week. South Korea’s KOSPI .KS11 hit nine-month lows and in mainland China, the CSI300 index .CSI300 lost almost 5 percent this week to one-year lows.
Japan’s Nikkei .N225 gave up 0.8 percent for a weekly loss of 1.7 percent.
